Market Commentary | Stronger Pound leaves its mark

European markets struggled to obtain a concrete direction after some diverse corporate news. The FTSE 100 added the decline from the previous day hurt by the continued rally of the British pound, which influenced the big exporting enterprises. In fact, the Pound rose almost 1% against the US Dollar, at one point changing hands at $1.3435. Oil was down today, amid the previous rally on the sentiment that market expectations of producer actions to cap oil output started to fade.

In the UK, the government sold £2.5 billion worth of 10-year bonds at a record low yield of 0.685%. The yield is down from the last auction in July and the one before in May. This downward trend in yield continued from the lows in Brexit vote, as the Bank of England cut interest rates and restarted its bond-buying program. In the meantime, Credit Suisse and Morgan Stanley said that the impact of the U.K slipping into a recession after the referendum vote is now ‘materially less’ relative to the expectations in June. This comes in view of better than expected economic data. The stimulus package issued by the BOE seem to have stabilized the country’s economy, keeping also in mind that triggering Article 50 may result in a stronger reaction.

Asian markets were also up on Tuesday with big blue chips affected by the U.S Dollar strength. The Nikkei Index closed in the green after hitting a fresh three-month high. On Wall Street, US markets traded slightly higher with telecommunications, energy and utility shares leading the S&P 500. The downturn in the U.S Dollar helped to boost shares of exporting firms, as exports became relatively cheaper.

Corporate News:

The German chemical company Bayer AG shares slipped 0.1% after it raised its offer to buy Monsanto Co. It announced its bidding to $127.50 per share from the previous offer of $125 per share. Although the companies are now in agreement on several issues that previously divided them, this sweetened offer may be not enough as Monsanto shareholders still want the offer to raise further, possibly exceeding the $130 mark per share. Monsanto shares soared over 2.5% but then went on gradually trading flat.  

Pay Pal clients are now able to use their credit or debit MasterCard cards when making payments. This comes after an agreement between the companies, similar to the previous deal with Visa Inc. MasterCard will waive the digital wallet fee it currently charges and will provide the company with volume discounts. Following such news, both PayPal and MasterCard Shares traded in the green.

Giant General Electric is pushing further into 3-D printing by spending around $1.4 billion in a public tender offer for Arcam AB and SLM Solutions. This would expand the company’s ability to make aircraft components and other parts with this manufacturing technique. Arcam has electron beam melting technology and manufactures advanced metal powders whilst SLM makes laser machines. Shares in Arcam and SLM soared 53.23% and 38.47% respectively.

Disclaimer:

This article was issued by Rodrick Duca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.